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Jun 12, 2024, 10:18am EDT
africa

The challenge with Chinese investment in Ethiopia’s industrialization push

Max Duncan/Hard Truth Films
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The News

ADDIS ABABA — Ethiopia’s state-backed bid to drive industrialization and transform its economy over the last couple of decades has had plenty of support from Chinese investors and operators to create jobs and opportunities for a rapidly growing population.

While that support has been welcomed, it’s been rare for policymakers or civil society to take a step back and examine its impact on everything from local work culture to land rights.

A new documentary which premiered at New York’s Tribeca Film Festival last week shines a light on the complexities of Chinese investment in the Horn of Africa nation. “Made in Ethiopia” focuses on the Eastern Industrial Park, about 100 kilometers outside the capital Addis Ababa. The film examines the forces driving the country’s attempt to become a manufacturing hub through the creation of industrial parks, of which there are now around 30. The film also highlights the friction that arises through the meeting of two different work cultures.

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Ethiopia’s industrialization strategy has focused on attracting foreign direct investment. A push in recent years to attract investment led to the landlocked nation being one of the continent’s top recipients of foreign direct investment. Chinese investment in the country, which tripled in 2021 from the previous year, played a major role.

But the approach has been beset by problems in recent years, from the COVID-19 pandemic to the two year war in the northern Tigray region that ended in 2022. The US — a major destination of textile and garment exports — terminated Ethiopia’s participation in the AGOA Trade Preference Program in 2022 due to sanctions imposed after the Tigray war.

Investors say policy inconsistency on customs regulations and trade logistic issues are also major pain points for them according to Hibret Lemma, CEO of the Investor’s Association at Hawassa Industrial Park, the largest government-owned park.

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“There’s a tendency to divert attention to other sectors, as ours is high maintenance,” he told Semafor Africa. “The government should focus on retaining the investors it has instead of trying to attract new ones in a tough climate.”

Other roadblocks to the success of the country’s strategy have been labor wage issues. The government’s attempt to attract textile and garment manufacturers have hit a snag because wage issues have remained a source of high turnover. Ethiopia remains one of the three countries without a set minimum wage on the continent.

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Maya’s view

Made in Ethiopia has achieved a major feat in portraying the sacrifice paid by ordinary people in making the industrialization dream a reality for Ethiopia. We see Ethiopian workers who are employed yet unable to make ends meet, as well as their Chinese counterparts who have left their families behind in China to make a better life for themselves.

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It shows the pains of transitions and the unseen sacrifices that sometimes don’t count toward development because of “thieves in the middle” — that’s the phrase used by a farmer who never got paid compensation for their land after they made way for park expansion.

Investment is a good opportunity for citizens, but the problems start with, “the way they’re invited in through the promise of cheap labor”, according to Deribsa Legesse, of the Confederation of Trade Unions in Ethiopia.

Negotiating with companies across the parks in the country to set up trade unions has been challenging but, after years of struggle, the process is finally gaining momentum. This is an opportunity to ease tensions. “It cultivates a culture of solving the problems through discussions,” he said.

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Room for Disagreement

Haregewoin Mirotaw, an investment advisor and director at the Ethiopian Investment Commission, says that while the past four years have been a turbulent time in the country, the fears of investors have been exaggerated. “As a developing country, these obstacles are there, but there is encouraging work being done,” she said, adding that the government has been taking steps to “increase productivity and import substitution” to reduce the trade imbalance and foreign currency shortages.

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